A company’s ability to pay a dividend to shareholders means its business is sufficiently successful to generate profits. Such companies usually grow at a consistent pace and those that are able to consistently increase dividends gain status into the Dividend Aristocrat Club. Qualification for this exclusive club requires a company to have an unbroken 25 year streak of increasing annual dividends. Unsurprisingly, these companies go on to become leaders in their respective industries and are usually also included in the S&P 500 Index. 

The tech era’s company stocks changed that trend. Aggressively pursuing growth and capital appreciation, these companies plowed extra profits into stock buyback programs and went for decades without declaring dividends. However, investors looking to make profits on their investments were drawn to the faster market price upswings. 

Dividend stocks have long been and continue to be the province of income-oriented investors. Their relatively slow but steady gains lacked the double digit or higher gains from tech and other high flying stocks. As a result, a perception arose that dividend stocks are stodgy and more oriented for retirees or the risk averse, while growth oriented stocks are where the profits were to be made. 

However, two trends that started in 2024 have given pause to reconsider these distinctions. The first one is a change of attitude about declaring dividends from some notable tech companies. The second is a reassessment of a dividend stock sector that may very well allow one to have their cake and eat it too. 

The Dividend Wall Breached

 

The “Magnificent 7” tech stocks Apple, Alphabet Google, Amazon, Meta Platforms (Facebook), Microsoft, Nvidia, and Tesla have been the strongest high flying stocks over the past couple of years. Their influence has catapulted the tech sector into becoming the most influential of our era to date. Between 2014 and 2024, the market cap of those stocks has grown from 10% to 35%.  Nvidia alone exhibited an astonishing 12 month ROI of 171.25%. 

However, while extraordinary growth has been the hallmark of the Magnificent 7, the dividend barrier has slowly, but inexorably been breached. Even though stock buybacks are still routine and some are in effect at the time of this writing, 71% of the Magnificent 7 stocks now pay dividends. 

Microsoft (NASDAQ: MSFT) was the first to begin 2004. In 21 years, its dividend has increased 800%. If this continues for 3 more years, it will qualify for Dividend Aristocrat status.

Apple (NASDAQ: AAPL) has had a consistent dividend declaration and payout since 2012. Its dividend has increased over 155% since then.

Nvidia (NASDAQ: NVDA) began its dividend payouts in 2013.

Meta Platforms / Facebook (NASDAQ: META) initiated its dividend platform nearly a year ago, in February, 2024.

Alphabet / Google (NASDAQ: GOOG) began its dividend declarations in April of 2024. 

According to some market analysts, the attraction of high growth from tech stocks and the Magnificent 7 in particular are partially responsible for the overall depressed buying of dividend stocks in 2023-2024. The combination of high yield savings accounts, higher yielding bonds, and double digit ROI from tech stocks served to create gains for people attempting to stay ahead of sizable inflation due to Congressional profligacy. 

However, the incoming Trump Administration is touting a return to the growth oriented, tax and regulatory cutting, pro-business policies of its previous term. Analysts anticipate a lower interest rate environment will once again attract investors to dividend stocks. The yields from High Yield Savings Accounts, bonds, and other fixed income assets will inevitably recede to the point where dividend stocks, which also have a capital appreciation component, will also rival other income assets in yield. 

Given that a majority of  Magnificent 7 stocks are now also in the dividend stock category, this trend may continue, and potentially spread to biotech and other sectors previously eschewing dividends for a focus on buybacks only. 

The AI Domino Effect

It’s no secret that AI has become the biggest topic of the tech industry over the same period that saw the huge surge of the Magnificent 7. Excitement about the potential of Artificial Intelligence, in particular, is responsible for the astronomic ascent of Nvidia, whose Graphics Processing Units (GPU) are integral for AI realization. 

The extraordinary escalation of AI interest has led to a proportionately large proliferation of data centers, which house the servers required to operate the processing and memory for AI and cryptocurrencies, which use data intensive blockchain algorithms, to function. 

This tech sector growth has been cited by President Trump, Elon Musk, and numerous others as requiring more than double the currently available amount of electricity to address the power needs of these data centers. This has led to an unexpected injection of interest in the usually staid  utilities sector. 

Analysts are now forecasting the utilities sector to see 13% growth for Q3 2025 and over 30% growth for Q4 2025. The huge electricity demand increase is expected to trigger announcements of massive infrastructure expansion and upgrades from utilities companies across the US. 

Ironically, these two trends may very well cause a cross pollination effect of investor types coming from both camps. The inclusion of high growth tech stocks may see formerly income based investors now dipping a toe in the water for newly added tech stocks to their dividend stock menus. Conversely, growth focused investors may see fresh opportunities with solidly dividend paying utilities stocks that contain sufficiently large upside potential as de facto ancillary AI stocks. 

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